EU economy ministers and the European Commission differ on how to rescue defaulting banks in the future, as ministers in favour of a bank levy yesterday (7 September) rejected the idea of putting the fiscal proceeds into a special fund to wind down insolvent banks.

While most countries are signing up to the need for a bank levy, a proposal from the European Commission to use the proceeds to create private sector funds to rescue insolvent banks carried little favour at yesterday’s ministerial talks.

Though ministers disagreed on the fundamentals of a bank levy – its size and which banks would be hit – many agreed they did not want to be told by the European Commission what they should do with the proceeds of the levy (EurActiv 06/09/10).

So far, Germany, the UK, France and Hungary have hatched plans for a levy, while Austria and Spain have said they plan to follow suit.

A May Commission proposal supported the establishment of levy-backed funds “to facilitate the resolution of failing banks in ways which avoid contagion, allow the bank to be wound down in an orderly manner and in a timeframe which avoids the ‘fire sale’ of assets”.

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